First one, one telling people how to manage their money. Very good, very in line with what I am doing at the moment, helping pple to ensure that they are well insured and putting their money hard at work.
Second one, ah-huh, the famous 'POSB Invest SingGrowth Account' that was published quite prominently in the newspaper. I always wanted to find out more about this plan, thinking how is it possible that it can give so good interest rates. After reading, then I realized how difficult it was to achieve the kind of interest rate they were promoting.
Features:1. Guaranteed return of full principal at maturity or upon Specified Redemption Event (unless banks totally collapsed)
2. The minimum interest over 5 yrs would be 2.78+1.08+1.18++1.28+1.38 = 7.70%. Over 5 yrs, it will work out to be 1.54%
Here comes the interesting part:
3. The Specified Redemption Event occurs when the Return of each Share is at or above 15% on a Fixing Date. What a clause??!!! Why do I say that? It simply means for the Bonus Payout to occur,
ALL 4 of the shares (Singapore Telecom, UOB, SPH, SembCorp) MUST achieve more than 15% ROR. If any one of them fails to do so, NO bonus payout!
Mathematically speaking, assuming these variables are independently related, the probability of the equation would be:
P(Share X achieveing >15% ROR) = 0.5 (to put it very optimistic)
P(ALL shares achieving >15% ROR) = 0.5 x 0.5 x 0.5 x 0.5 = 0.0625!
It would be far off to put your money in a simple short term endownment plan which generates more than 1.54%/annum. Or if you are interested to know more about instruments to make your money grow harder, contact me anytime.
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